North Korea, one of the world's most centrally planned and isolated economies, faces desperate economic conditions. Industrial capital stock is nearly beyond repair as a result of years of underinvestment and shortages of spare parts. Industrial and power output have declined in parallel. Due in part to severe summer flooding followed by dry weather conditions in the fall of 2006, the nation has suffered its 12th year of food shortages because of on-going systemic problems, including a lack of arable land, collective farming practices, and chronic shortages of tractors and fuel. Massive international food aid deliveries have allowed the people of North Korea to escape mass starvation since famine threatened in 1995, but the population continues to suffer from prolonged malnutrition and poor living conditions. Large-scale military spending eats up resources needed for investment and civilian consumption. In 2004, the regime formalized an arrangement whereby private 'farmers' markets' were allowed to begin selling a wider range of goods. It also permitted some private farming on an experimental basis in an effort to boost agricultural output. In October 2005, the regime reversed some of these policies by forbidding private sales of grains and reinstituting a centralized food rationing system. By December 2005, the regime terminated most international humanitarian assistance operations in North Korea (calling instead for developmental assistance only) and restricted the activities of remaining international and non-governmental aid organizations such as the World Food Program. External food aid now comes primarily from China and South Korea in the form of grants and long-term concessional loans. Firm political control remains the Communist government's overriding concern, which will likely inhibit the loosening of economic regulations.

GDP - real growth rate:

1.8% (2006 est.)

GDP (purchasing power parity):

$40 billion note: North Korea does not publish any reliable National Income Accounts data; the datum shown here is derived from purchasing power parity (PPP) GDP estimates for North Korea that were made by Angus MADDISON in a study conducted for the OECD; his figure for 1999 was extrapolated to 2006 using estimated real growth rates for North Korea's GDP and an inflation factor based on the US GDP deflator; the result was rounded to the nearest $10 billion (2006 est.)

NA; note - approximately 350,000 metric tons in food aid, worth approximately $118 million, through the World Food Program appeal in 2004, plus additional aid from bilateral donors and non-governmental organizations